COP Flips The Script On US Shale -- April 13, 2023

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COP: flips the script on US shale.  

It begins: 

[COP] secured perhaps the US oil deal of the decade by picking up industry pioneer Concho Resources Inc. for $13 billion in the depths of the pandemic. Now, three years later, others are increasingly following suit.

Ovintiv Inc. agreed to spend $4.3 billion on private-equity owned assets earlier this month, while it was reported last week that Exxon Mobil Corp. is eyeing Pioneer Natural Resources Co., one of the Permian Basin’s largest independent producers. More deals are likely.

In this latest uptick in shale M&A, the big are getting bigger and the small get bought. That’s yet another nail in the coffin for the debt-fueled, buccaneering archetype that once prevailed in the shale world. Back in those days, the industry splurged on production growth and managed to upset everyone from OPEC to its own shareholders.

And then finishes:

ConocoPhillips exemplified the new style of US oil company when it unveiled its strategic plan to investors in New York on Wednesday. It will increase production in the Lower 48 (i.e., the contiguous US) by about 7% annually over the next 10 years, a far cry from Concho’s growth heyday of almost 30%.

[COP] will reinvest just half of his company’s cash from operations in new production, leaving the rest for buybacks and dividends, down from more than 100% in 2012 through 2016. 

It’s all rather sensible, if a bit boring, especially coming just days after oil prices rallied following OPEC+’s surprise production cut.  

To spice things up, Lance told Bloomberg Television that deal flow, particularly in the Permian, is likely to accelerate over the coming months. But the reasons for doing so are also fairly humdrum. Buyers are looking to capture “synergies” and replenish top-tier well locations, he said. Meanwhile, smaller, faster-growing companies are happy to cash out through sales.

I'm lovin' in.

Re-posting, link here.

ConocoPhillips unveiled a 10-year plan Wednesday that envisions more than $115B of free cash flow available for distributions and capital spending averaging ~$10B annually, resulting in a 4%-5% production compound annual growth rate at an average reinvestment rate of ~50%.

The plan foresees durable cash flow growth with projected cash from operations and FCF compounded annual growth rate of ~6% and 11%, respectively, and return on capital employed increasing at least one percentage point annually.

Conoco (COP) said it will seek a resource base of 20B boe at less than $40/bbl WTI, representing a resource life of more than 30 years at current production levels.

The company also pledged to speed up its greenhouse gas intensity reduction target through 2030 by 10% to a range of 50%-60% using a 2016 baseline.

ConocoPhillips (COP) is expected to provide shareholders with almost 5% in annualized dividends and share buybacks, generating strong shareholder returns.

From the balcony, today: